Brian Easton says while Claudia Goldin won the 2023 Nobel Economics Laureateship and may have progressed our understanding of women in the economy, that has not resolved all the issues

This is a re-post of an article originally published on pundit.co.nz. It is here with permission.

A woman who was once chief executive of New Zealand’s biggest company said ‘It is true that a large percentage of the [women’s pay] gap is unexplained and that's where the issue comes about; could it be bias even if that's unconscious bias? Regardless of how we've got a gap … the much more important thing is, what are we going to do about it?’

That is so characteristic of the way we tackle policy in New Zealand. We don’t worry about understanding a problem; we focus on solving it. We don’t even bother about trying to find out what is known about it. Just get on with the policy.

There is, in fact, an enormous amount of research on the different income patterns of men’s and women’s earnings – very little of it in New Zealand. (Some of the overseas research has been used in the better policy work in New Zealand.)

If this general neglect as been unacceptable, hopefully it cannot be justified any longer given the award of the Bank of Sweden’s economics prize in honour of Alfred Nobel to Claudia Goldin.

She was not awarded just for her work in women’s economics – which is, after all, also in men’s economics because they are interdependent. Goldin is a bloody good economist (as were the other two female Nobel laureates).

(It was repeatedly mentioned that she is the first women to have been awarded the economics prize on her own rather than jointly. The reason is that in about 1975 the award should have gone to Joan Robinson who made some major innovations in economic thinking. But one member of the selection panel had a snitch on her and vetoed the choice. Never underestimate the extent to which the eccentricities of a panel determine awards.)

Goldin’s many contributions have been mainly in (American) economic history, including on inequality. She was a student of Robert Fogel, the last economic historian laureate, who, like her, imaginatively investigated important questions – in his case, most notably the economics of American slavery – often finding data which no one else thought existed. But she also addresses contemporary issues.

She traced the pattern of American women’s employment over time. For the generation of women born between 1878 and 1897, a successful career typically required forgoing children and sometimes marriage. The choice women faced was ‘family or career’. For their granddaughters born between 1924 and 1943, it was ‘family then job’ for a college-educated woman: work after graduation, marry (soon), have children and drop out of the workforce, returning once her children were in school. But her prolonged absence from work meant she did not have the skills and experience necessary to thrive in the workplace. For Goldin’s last group, born after 1958, many women aspired to achieve ‘career and family’. The shift was aided by access to better contraception, which helped women delay marriage and childbearing and by more liberal social norms.

The research she did on the impact of contraception was with her personal and research partner Lawrence Katz, who is also a very good economist. Using an ingenious research strategy they found that the contraceptive pill gave women more control over decisions about children, enabling them to plan their career and develop their work skills, so the age of first birth increased.

Demographer Natalie Jackson identified an interesting New Zealand twist. Māori mothers have their children about five years earlier than Pakeha ones. What do the latter do in those five years? They add to their qualifications and their paid-work experience. They are much better placed when they return to paid work as the children grow up.

Despite these changes there remains a clear gender gap for these women, most notably with respect to pay. In a recent 2021 book, Career and Family: Women’s Century-Long Journey Toward Equity, Goldin argues that most women no longer suffer unequal pay nor is the gender pay gap driven primarily by women’s choice of occupation. She argues markets generously reward anyone, male or female, who is willing to hold down what she calls ‘greedy jobs’, those which demand long and unpredictable hours. Parents needing to be on-call at home in case a child falls ill and needs picking up from school, or needs cheering on at a concert or football match, cannot hold greedy jobs which require being available for last-minute demands from a client or boss. Typically, it is the mother who spends more time raising children; the gender pay gap tends to open up after a first child. Goldin says ‘Men forgo time with their family and women often forgo their career.’

Does it always have to be like this? I’ve had friends in which the parenting roles have reversed. But there is still the inequality, even if it does not appear as gender inequality. Goldin is optimistic that the ability to work at home will reduce the gap – it won’t eliminate it though.

She is not telling the full story. Some of my own research illustrates another dimension. Fifty years ago, I was interested in how non-market work affected the market economy. (This was well before the popular literature on the deficiencies of GDP as a measure of human activity. The long history of economists concerned about the problem before my work is rarely mentioned by the populists.)

I got blocked because there was no data. That led me to advocate an official time-use survey which Statistics New Zealand first implemented twenty-odd years ago. It is an extremely valuable resource although sadly few people have tried to exploit it. (Where are the Claudia Goldins when we need them?) My findings are reported in Not in Narrow Seas: The Economic History of Aotearoa New Zealand but here is a summary of some of them.

Time-use surveys ask individuals to keep diaries of what they did each hour. It turns out that on average men and women spend roughly the same amount of time on most things such as personal care (including sleeping) at 76 hours a week (out of 168 hours) and leisure (40 hours a week).

The big difference is in their working time balance. Both spend about 48 hours a week on such activities, but men's paid labour force activity (including travelling to work) is 30 hours a week while women's is 16 hours. (The male figure appears low because it includes the retired and students.) The remaining time is mainly work around the house; men do about half the amount women do.

So men and women work as long but men get paid for almost twice as many hours. Hence women have lower incomes from working, even if you adjust for age and qualifications.

Additionally they get paid less per hour. The reasons they get paid less are various. Goldin gives some, such as women having less work experience and being less into greedy jobs. What she does not pay much attention to is discrimination. I think that comes from her ‘Chicago School’ tendencies. (She is at Harvard University).

Neo-liberals argue that discrimination is insignificant, it’s the way the markets work. Others suggest that labour markets are fragmented and do not work as competitively as the neo-liberals assume. A particular issue arises if a single employer dominates a particular market. (The technical term is ‘monopsonist’.) They can screw down wages. (One of the pioneers exploring such non-competitive markets was Joan Robinson.)

We have had much legislation since 1973 to weaken the discrimination. The gap has diminished but it is still there. New Zealand’s most widespread monopsonist is the government. To give the Ardern-Hipkins Government some credit, it was reducing its monopsonistic discrimination. The consequence has been higher taxes with no real increase in services – just greater fairness.

Claudia Goldin would seem to give little weight to the last couple of paragraphs. Many economists would disagree. Even so they will celebrate her Noble laureateship. Her research has contributed markedly to the progression of the scientific part of economics even if some of her policy conclusions may be limited.

Even more, the award recognises an area where economists ought to be doing more work, rather than leaving non-economists to argue from ignorance.

*Brian Easton, an independent scholar, is an economist, social statistician, public policy analyst and historian. He was the Listener economic columnist from 1978 to 2014. This is a re-post of an article originally published on pundit.co.nz. It is here with permission.